Presentation to Scott & Stringfellow, a BB&T Corporation Affiliate. December 8, 2011

Transcription

1 , a BB&T Corporation Affiliate

2 Forward-Looking Statements We want to remind everyone that the information included in this presentation may contain statements relating to future results, which are forward-looking statements within the meaning of federal securities laws. We caution you that these forwardlooking statements speak only as of the date hereof, and we have no obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments, or otherwise. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including the risks described in our Form 10-K and Form 10-Q and our other filings with the Securities and Exchange Commission. 2

3 Topics I. Synalloy Overview II. Strategic Goals III. Business Unit Review Manufacturers Chemicals BRISMET BristolFab and Ram-Fab IV. Corporate Development Process Overview 3

4 I. Synalloy Overview 4

5 Synalloy at a Glance Established in 1945 Traded on the NASDAQ under SYNL Operates as a holdings company with 450 employees Union and non-union operations Corporate staff comprised of fewer than 15 employees CEO in Richmond (VA); All others in Spartanburg (SC) 5

6 Three Business Units Specialty Chemicals Manufacturing and Distribution Stainless Steel Pipe Manufacturing Stainless Steel and Carbon Pipe Fabrication 6

7 Financial Highlights 2011 Nine Months Year Over Year Revenue $ million Up 15% Operating Income (excl. Corporate Expenses) $9.71 million Up 76% Net Income $4.78 million Up 86% EBITDA $9.87 million Up 63% 7

8 Financial Highlights (cont ) Total Debt (BB&T Line of Credit is $20 million) At October 1, 2011 $8.91 million Debt-to-Capital 11.4% Tangible Book Value per Share $10.49 Market Price per Share (52-Week Range: $9.05 to $15.50) Market Capitalization $11.00 $69.5 million $0.25 per share dividend paid on December 5th 8

9 II. Strategic Goals 9

10 Strategic Goals Foster a Performance Driven Culture Be a Sales and Customer Driven Organization Develop the Management Team and Board of Directors Pursue Complementary and New Platform Acquisitions 10

11 Strategic Goals (cont ) Performance Driven Culture Sales and Customer Driven Organization Management and Board Development Acquisition Pursuit Sense of urgency Steady, continuous improvement in operating metrics and bottom line results Soft economy is no excuse Bonuses tied to achieving pre-tax income targets Maximize performance of each Business Unit 11

12 Strategic Goals (cont ) Performance Driven Culture Sales and Customer Driven Organization Management and Board Development Acquisition Pursuit Progress in 2011: New Sales leadership installed in each Business Unit For each Business Unit: Expanded visibility and branding via conferences & tradeshows, web presence & SEO, new marketing materials, and increased use of industry data sources Targeted sales activity goals and tracking Increased sales and marketing budgets across the company 12

13 Strategic Goals (cont ) Performance Driven Culture Sales and Customer Driven Organization Management and Board Development Acquisition Pursuit Progress in 2011: Added two new Board members each with financial, M&A and previous Board experience Improved senior management hired outside talent, culled weak performers and promoted high achievers Senior management team now includes 12 individuals either new to the company or in a new role 13

14 Strategic Goals (cont ) Performance Driven Culture Sales and Customer Driven Organization Management and Board Development Acquisition Pursuit Disciplined corporate development process Detailed discussion later in this presentation 14

15 III-A. Business Unit Review: Manufacturers Chemicals 15

16 MC: Overview Established in 1919 and acquired by Synalloy in 1996 Cleveland (TN) Operation: 120,000 square foot facility Full service chemical manufacturing plant, including extensive warehousing and distribution capacity Dalton (GA) Operation: 32,000 square foot facility Formulates dye mixes, has a full service shade matching laboratory and has warehousing and distribution capacity 16

17 MC: Products and Markets Core Business Low cost regional contract manufacturer for medium and large chemical companies (50% of business) Proprietary product development and manufacturing for end customers and resellers 17

18 MC: Products and Markets (cont ) Product Examples Lubricants Surfactants Defoamers Reaction Intermediaries Colorants / Dyes Sulfated Fats and Oils Capabilities High Temperature Reactions Blending and Mixing Powder Blending Color Shade Matching Particle Size Reduction Sulfation R&D and Quality Control Warehousing and Distribution End Markets Paper Carpet and Textiles Industrial Chemicals Metals and Mining Agriculture Paint Latex Additives Automotive Petroleum Cosmetics 18

19 MC: Financial Highlights 2011 Nine Months Year Over Year Revenue $32.6 million Flat Pounds Sold * Down 11% Operating Income $2.3 million Down 28% EBITDA $2.7 million Down 23% Sources of Decline in Pounds Sold: 38% of decline due to slow market for customer 36% due to customer losing business 18% due to product being taken in-house by customer _ 8% due to lost business to competing toll manufacturer 100% 19

20 MC: Strategic Initiatives Leadership Transition Sales Growth Capacity Expansion Strategic Acquisitions Recently promoted two executives to lead: R&D / Operations Sales / Administration 20

21 MC: Strategic Initiatives Leadership Transition Sales Growth Capacity Expansion Strategic Acquisitions Targeting niche markets: Sulfation, Chemical Intermediaries, Imidazoline Quats and Green Chemistries Making progress on several large potential defoamer projects Emphasizing new product development via expanded lab capabilities and technical support Will hire a new sales rep to fill out manufacturing capacity 21

22 MC: Strategic Initiatives Leadership Transition Sales Growth Capacity Expansion Strategic Acquisitions Major expansion of hot oil reactor capacity will be completed in December 2012 growth capital expenditures will approach $500K 22

23 MC: Strategic Initiatives Leadership Transition Sales Growth Capacity Expansion Strategic Acquisitions Pursuing both tuck-in opportunities and larger companies 23

24 III-B. Business Unit Review: BRISMET 24

25 BRISMET: Overview Established in 1946 and acquired by Synalloy in ,000 square foot manufacturing facility in Bristol (TN) Produces a diverse line of welded pipe stainless steel, nickel, duplex, titanium and moly grades Maintains advanced quality systems ISO, PED, ASME certifications including nuclear 25

26 BRISMET: Markets and Competition Majority of sales generated through the pipe, valve and fittings distribution system Additional sales generated from Synalloy s Fabrication Division (BristolFab and Ram-Fab) End use markets include: Energy, Water & Wastewater Treatment, Chemical, Petro- Chemical, Power, Pulp & Paper, Brewery & Food Processing, Marine and Mining Competitors: Outokumpu, Marcegaglia, Felker, Swepco, Mach and Rath 26

27 BRISMET: Financial Highlights 2011 (9 Months) Core Operating Income $5.2 million 2010 (9 Months) Core Operating Income ($1.6 million) 5-Year Average Annual Core Operating Income $2.4 million Note: Core Operating Income excludes inventory gains and losses 27

28 Oct-99 Feb-00 Jun-00 Oct-00 Feb-01 Jun-01 Oct-01 Feb-02 Jun-02 Oct-02 Feb-03 Jun-03 Oct-03 Feb-04 Jun-04 Oct-04 Feb-05 Jun-05 Oct-05 Feb-06 Jun-06 Oct-06 Feb-07 Jun-07 Oct-07 Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 Oct-10 Feb-11 Jun-11 Oct-11 $ per pound BRISMET: Raw Material Surcharges $4.00 $3.50 $ L 316L BRISMET inventory profits totaled $7.8 million BRISMET inventory losses totaled ($5.4 million) $2.50 $2.00 $1.50 $1.00 $0.50 $

29 BRISMET: Strategic Initiatives Sales Growth Operating Efficiency & Safety Profitability Increase market share across all pipe sizes excellent progress in 2011 Increase international sales currently up to ~10% of revenue from zero two years ago Mach alliance targeting large diameter, heavy wall pipe 29

30 BRISMET: Strategic Initiatives Sales Growth Operating Efficiency & Safety Profitability Maintain focus on Safety Emphasize equipment maintenance and general housekeeping Continue to integrate Metals Division under Division President Improve manufacturing efficiencies assembly line, welding controls Manage to operating metrics each month; maintain current standards 30

31 BRISMET: Strategic Initiatives Sales Growth Operating Efficiency & Safety Profitability Continue to improve product mix a key earnings driver Focus on continuous improvement in core earnings, excluding inventory adjustments 31

32 BRISMET: Facility After Cleanup 32

33 III-C. Business Unit Review: Fabrication Division (BristolFab and Ram-Fab) 33

34 FAB: Overview BristolFab 70+ years in business acquired by Synalloy in 1964 Union shop on same property as BRISMET in Bristol (TN) Fabricates stainless and nickel alloy pipe Ram-Fab Acquired by Synalloy in Sept 2009 Non-Union shop located in Crossett (AR) Fabricates carbon, stainless steel and chrome pipe 34

35 FAB: Markets and Competition FAB contracts with engineering and construction firms, as well as directly with project owners End use markets include: Energy, Water & Wastewater Treatment, Chemical, Petro- Chemical, Power, Pulp & Paper, Brewery & Food Processing, Marine, Mining, Liquefied Natural Gas (LNG) and Liquefaction, Nuclear Competitors: Shaw and Turner (both owned by construction firms), and 11 other primary U.S. competitors 35

36 FAB: Financial Highlights 2011 (9 Months) Operating Income $3.2 million 5-Year Average Annual Core Operating Income Revenue Backlog on Oct 1, 2011 Revenue Backlog on Oct 1, 2010 $5.1 million $18 million $33 million 36

37 FAB: Strategic Initiatives Sales Operating Efficiency & Safety Rebuild backlog Sales team overhaul new executives joined in early Sept 2011 Add estimating and drafting resources to support increased quote activity Restore FAB s visibility and branding Early Results: Active quotes up to $50 million currently from $16 million in 1Q $10.5 million in new orders since Oct 1st 37

38 FAB: Strategic Initiatives Sales Operating Efficiency & Safety Upgrade equipment and facility appearance in each location Improve Safety in each location Continue to integrate manufacturing (both companies) under one manager Continue to integrate entire Metals Division under Division President identify and execute on cost savings and other efficiencies Establish and manage to operating metrics each month 38

39 BristolFab: After Fall 2011 Cleanup 39

40 Ram-Fab: After Aug 2011 Cleanup 40

41 IV. Corporate Development Process 41

42 Corporate Development Overview Disciplined approach led by CEO Team includes Director of Corporate Development, CFO and Corporate Controller Targeting tuck-in / complementary acquisitions and new platform businesses Allocate capital where it can earn the best return 42

43 Target Industries Industrial: Chemicals, Components, Instrumentation & Controls, Fabrication and Metals Commercial: Infrastructure Services, Commercial and Consumer Durables Business Services Logistics: Asset-Light Third Party Logistics (3PL) Niche Manufacturing 43

44 Acquisition Criteria Annual EBITDA: $2 million to $10 million Annual CapEx-to-EBITDA < 25% Pre-tax Return on Capital > 18% Accretive to Synalloy earnings in year one Strong management team that remains post acquisition Niche market pricing power Complementary, and growing, product lines or markets Reduces Synalloy s current earnings cyclicality 44

45 Synalloy s Appeal to Acquisition Targets Target Middle-Market Business Owners Looking to Sell or Grow Small-Cap Public Companies Synalloy s Appeal Public stock as part of purchase price allows additional wealth creation & liquidity A more patient capital partner than a private equity group Continued autonomy to run the business Access to capital for growth Spread public company costs across more revenue Liquidity event Talented, Growth-Oriented Management Professionals Chance to grow a larger, more diversified holding company Exposure to multiple industries and M&A activity 45

46 Questions? 46